10-Q: Selectis Health Narrows Loss, Boosted by Credits

Selectis Health, Inc. reported a significant reduction in net loss for the nine months ended September 30, 2025, and a swing to net income for the third quarter, driven by increased healthcare revenue and employee retention credits, despite ongoing liquidity concerns and internal control weaknesses.

Summary

• Reported a net income of $752,365 for the three months ended September 30, 2025, a significant improvement from a net loss of $(1,607,122) in the prior year period.
• Reduced net loss for the nine months ended September 30, 2025, to $(211,631) from $(1,847,498) in the comparable prior year period.
• Healthcare revenue increased by 8% to $10,839,954 for the three months ended September 30, 2025, and by 10% to $31,768,137 for the nine months ended September 30, 2025, primarily due to increased Medicaid rates in Georgia and Oklahoma facilities.
• Operating expenses increased by 12% for the three months and 10% for the nine months, attributed to higher operating costs due to inflation.
• Provision for credit losses decreased significantly by 87% for the three months and 67% for the nine months, due to hiring outside professionals for collections.
• Received $986,423 in employee retention credits during the nine months ended September 30, 2025, with a remaining receivable of $271,528 fully reserved.
• Cash and cash equivalents decreased to $417,125 as of September 30, 2025, from $680,332 as of December 31, 2024.
• Total debt, net of discount, decreased to $31,126,545 as of September 30, 2025, from $32,133,020 as of December 31, 2024.
• Management identified substantial doubt about the company's ability to continue as a going concern due to a net loss of approximately $0.2 million and negative net working capital of approximately $16.3 million for the nine months ended September 30, 2025.
• The company was not in compliance with two loan covenants as of September 30, 2025, and December 31, 2024, leading to reclassification of these amounts to current maturities of long-term debt.
• A previously announced sale of four Georgia skilled nursing facilities for $27.0 million was terminated by the purchaser on July 13, 2025, though the company received a $400,000 non-refundable deposit.

Sentiment

Score: 4

Explanation: While the company showed significant improvement in net income for the quarter and reduced its year-to-date net loss, severe liquidity issues, a 'going concern' warning, non-compliance with debt covenants, and material weaknesses in internal controls present substantial risks. The failed asset sale also adds uncertainty. The positive financial trends are overshadowed by these fundamental operational and financial stability concerns.

Positives

• Achieved a net income of $752,365 for the three months ended September 30, 2025, a significant turnaround from a net loss of $(1,607,122) in the prior year.
• Reduced net loss for the nine months ended September 30, 2025, to $(211,631) from $(1,847,498) in the prior year, indicating improved financial performance.
• Healthcare revenue increased by 8% for the three months and 10% for the nine months ended September 30, 2025, driven by higher Medicaid rates.
• Operating loss significantly improved, decreasing to $(296,960) for the three months and $(1,168,995) for the nine months ended September 30, 2025, from $(1,171,763) and $(2,631,937) respectively in the prior year periods.
• Interest expense, net, decreased by 57% for the three months and 42% for the nine months ended September 30, 2025, due to debt reduction and principal payments.
• Provision for credit losses decreased by 87% for the three months and 67% for the nine months ended September 30, 2025, reflecting improved collection efforts.
• Received $986,423 in income from employee retention credits during the nine months ended September 30, 2025.
• Cash provided by operating activities was $1,238,060 for the nine months ended September 30, 2025, a substantial improvement from cash used in operations of $(1,401,076) in the prior year.

Negatives

• Substantial doubt exists about the company's ability to continue as a going concern due to a net loss of approximately $0.2 million and negative net working capital of approximately $16.3 million for the nine months ended September 30, 2025.
• Not in compliance with two loan covenants as of September 30, 2025, and December 31, 2024, leading to reclassification of debt to current maturities.
• The planned sale of four Georgia skilled nursing facilities for $27.0 million was terminated by the purchaser on July 13, 2025.
• Cash and cash equivalents decreased to $417,125 as of September 30, 2025, from $680,332 as of December 31, 2024.
• Total stockholders' deficit increased to $(5,651,887) as of September 30, 2025, from $(5,410,256) as of December 31, 2024.
• Rental revenue ceased after June 2024 due to the sale of the Archway Property, resulting in a 100% decrease for the nine months ended September 30, 2025.

Risks

• Ability to continue as a going concern is contingent upon successful execution of management's plan to improve liquidity and profitability, including increasing occupancy, increasing Medicaid reimbursement rates, controlling operating expenses, and seeking additional capital.
• Failure to generate sufficient liquidity could negatively impact future operations.
• Exposure to claims of negligence resulting in injury or death to residents, with potential for material adverse financial losses despite insurance coverage.
• The long-term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters, including fines, penalties, and exclusions from Medicare/Medicaid programs.
• Laws and regulations governing Medicare, Medicaid, and other federal healthcare programs are complex and subject to interpretation, posing compliance risks.
• Material weaknesses in internal control over financial reporting, including inadequate IT general and application controls, lack of segregation of duties, and lack of a formal multi-level review process, could adversely affect the ability to record, process, summarize, and report financial information reliably.

Future Outlook

Management's ability to continue as a going concern is contingent upon successfully executing plans to improve liquidity and profitability. These plans include increasing occupancy in facilities, increasing Medicaid reimbursement rates, controlling operating expenses, and seeking additional capital through debt or equity issuance or asset sales. The company also recently entered into a management services agreement to operate a new facility in Oklahoma City, Oklahoma, starting October 1, 2025, which is expected to contribute to future revenue.

Management Comments

• Management's plan over the next twelve months is to improve the company's liquidity and profitability by increasing occupancy in facilities and increasing Medicaid reimbursement rates.
• Management intends to control operating expenses to improve financial health.
• The company is seeking additional capital through the issuance of debt or equity securities, or the sale of assets.
• Management believes that the focus on opportunities within the current portfolio, future acquisitions, settlement/refinance of debt, and potential funds from stock sales are intended to alleviate substantial doubt about the company's ability to continue as a going concern.
• Management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects the financial position, results of operations and cash flows for the periods presented, despite identified material weaknesses in internal controls.
• The company plans to implement multi-level review in 2025 and work internally and with third-parties to ensure proper controls are in place going forward.

Industry Context

The company operates in the senior care industry, which includes assisted living, independent living, and skilled nursing facilities. The increase in healthcare revenue is partly attributed to higher Medicaid rates, indicating potential positive shifts in government reimbursement policies or successful negotiation by the company. However, the industry faces challenges such as rising operating costs due to inflation, as noted by the company's increased property taxes, insurance, and other operating expenses. The ongoing scrutiny by governmental regulators and the prevalence of personal injury/wrongful death claims are inherent risks within this sector.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or industry benchmarks to assess the results in the context of global standards.

Corporate Governance

Legal Proceedings

• Hines v. Global Abbeville LLC, d/b/a Glen Eagle, et al (Superior Court of Warren County, State of Georgia, Civil Action No.2023-CV-094): A personal injury lawsuit filed on September 11, 2023, alleging negligence in care administered at the Glen Eagle facility. The company denies the allegations and believes its exposure is de minimus, having referred the litigation to its insurance company.
• Hunter v. Global Abbeville LLC, d/b/a Glen Eagle, et al (State Court of Fulton County, State of Georgia): A wrongful death lawsuit filed on June 20, 2023, alleging negligence that led to the death of the plaintiff's mother at the facility. The company denies deviating from the standard of care and believes its exposure is de minimus, having referred the litigation to its insurance company.

Related Party Transactions

• Senior secured promissory notes related parties totaled $775,000 outstanding as of September 30, 2025, and $750,000 as of December 31, 2024, bearing 13% fixed interest and maturing December 31, 2025.
• In 2017, $425,000 of senior secured notes were sold and issued to related parties.
• During 2018, $875,000 of senior secured notes that were extended to October 31, 2021, by virtue of an exchange, were to related parties.
• A sale of $100,000 Units in the 11% Senior Secured Notes offering on March 3, 2020, was to a related party.
• Assumption of debt related party from a non-related party amounted to $25,000 during the nine months ended September 30, 2025.

Stakeholder Impact

• Shareholders face potential dilution risk if the company pursues equity financing to address liquidity concerns.
• Shareholders are impacted by the 'going concern' warning, indicating significant financial instability, despite improved quarterly net income.
• Creditors are affected by the company's non-compliance with two loan covenants and ongoing negotiations for mortgage refinancing, which could impact debt repayment schedules.
• Employees and customers/residents may experience uncertainty due to the 'going concern' status and the company's efforts to control operating expenses and increase occupancy.
• Customers/residents are directly impacted by the legal proceedings alleging negligence and wrongful death, raising concerns about quality of care, although the company denies the allegations and refers to insurance coverage.

Next Steps

• Implement multi-level review processes and other controls to address identified material weaknesses in internal control over financial reporting in 2025.
• Continue negotiations for refinancing two Georgia mortgages, which are currently in forbearance until December 31, 2025.
• Operate the new facility in Oklahoma City, Oklahoma, under a management services agreement with Tiaps Rehab Center, LLC, which commenced on October 1, 2025.
• Execute management's plan to increase occupancy, raise Medicaid reimbursement rates, control operating expenses, and seek additional capital to improve liquidity and profitability.

Key Dates

Recommendation

While Selectis Health demonstrated a significant turnaround to net income in Q3 2025 and a substantial reduction in year-to-date net loss, these improvements are overshadowed by critical underlying issues. The 'going concern' warning, negative net working capital, non-compliance with debt covenants, and material weaknesses in internal controls signal severe financial and operational instability. The failed sale of Georgia facilities also adds uncertainty. For existing investors, holding the stock might be justified by the recent positive financial momentum and management's stated plans to address liquidity, but the high risk profile makes it unsuitable for new investment without significant de-risking.

Keywords

Healthcare, Senior Housing, Skilled Nursing Facilities, Assisted Living, Independent Living, SEC Filing, 10-Q, Financial Results, Liquidity, Going Concern, Debt, Corporate Governance, Internal Controls, Medicaid, Employee Retention Credit